In the Mood for Giving

In the Mood for Giving

* This article was originally published on Dec. 19, 2018. It has been updated for 2020.

Happy GivingTuesday! In addition to being a celebration of generosity and community after a mega-shopping weekend, today also marks one week until Colorado Gives Day, on Dec. 8. Whether you’re thinking of showing your generosity on a national, statewide, or local level, are you in the mood for giving?

Speaking of local, my evidence may be anecdotal, but I like to think of Fort Collins as a philanthropic city. Sharing a home with a major university and several inspiring nonprofit organizations, it seems many Fort Collins residents open their hearts and their wallets to great causes. As the year is coming to a close and the holidays fast approaching, now is as good a time as any to talk about charitable giving.

Charitable giving — and receiving a tax break

The true reward of giving back is knowing that you have helped someone in need, furthered groundbreaking research, or contributed to your community in some way.

Wondering How Your Charitable Gift Could Impact Your Income Taxes?

Download a copy of our Year-End Tax Planning Checklist! In addition to helping you stay on track with your end-of-year tax planning to-dos, it can help you visualize the progress you’re making on your tax-planning opportunities! Download the checklist.

From a personal finance perspective, the perks can range from creating an income source for yourself and your family down to the most common: receiving a tax break. In the future, we’ll discuss types of structured giving that can be used for great “win-win-win” situations but, for now, we’ll focus on taxes.

The most common donation to charitable causes is cash. However, under the right circumstances, you can donate nearly everything you own — even the use of your car for a charitable purpose — to a charity and qualify for a tax deduction. Although charities can always use it if you’re able, about the only thing you can’t give to a charity and receive a tax break for is your time — unless for complex billable hours for pro-bono-esque services.

▶︎ Pro Tip: Make your philanthropic dollars go further when you support local nonprofits through Colorado Gives Day! You can schedule your donation early and/or give on Tuesday, Dec. 8. According to the Colorado Gives website, “This annual statewide movement celebrates and increases philanthropy in Colorado through online giving. The $1 million incentive fund made possible by Community First Foundation, Firstbank and other community members boosts the value of every donation.”

Deduction considerations

Here’s what you should keep in mind as you contemplate your charitable gifts this year:

Itemized deductions: For those who itemize deductions, there’s normally a 60% Adjusted Gross Income (AGI) limit on deductions for cash charitable donations. However, the CARES Act made it so you can deduct 100% of your AGI for 2020 for cash donations to qualifying charities (donor-advised funds and private nonprofit foundations are excluded).

▶︎ Pro Tip: Planning to make charitable contributions in the future? You may consider making multiple years’ worth of contributions this year so you can itemize your deductions.

Standard deduction: If you don’t itemize deductions, you cannot deduct your gift on your federal income tax return — and remember, the standard deduction is $12,400 for single taxpayers and $24,800 for married taxpayers filing jointly for the 2020 tax year. However, if you take a standard deduction, you can write off up to $300 of charitable cash contributions “above the line” in 2020.

If you find yourself in a situation where you are giving a highly appreciated asset or a large amount of cash to charity, remember that there are limits — as always, with exceptions — on the deduction that you can claim in the current year. For “public” charities, the current year deduction is limited to 60% of your adjusted gross income (AGI) for cash and short-term gain property and 30% of AGI for long-term gain property. For certain “private” charities, the deduction limits are lower.

You can carry anything you cannot claim in the current year because of the limits above forward for five years. Also, keep in mind that the law requires that non-cash and -property donations given to charities must be in at least “good used” condition to qualify for a deduction. So keep it clean, and keep giving back.

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Jason Speciner
Jason Speciner
jason@fpfoco.com

Jason Speciner is a CERTIFIED FINANCIAL PLANNER™ professional, an Enrolled Agent, and the founder of fee-only firm Financial Planning Fort Collins. He is also a member of the National Association of Personal Financial Advisors (NAPFA), Financial Planning Association (FPA), and XY Planning Network. Since 2004, he has served clients of all ages and backgrounds with unique experience working with members of generations X and Y. To learn more, check out Jason's blogs and see the media he's been featured in.